Trump Knows Exactly What His China Trade War Means

President Biden struck a less confrontational tone upon assuming office in January 2021, yet he similarly raised tariffs on China . Like China, the EU and Japan had established large trade surpluses with the US, an issue he sought to address , but geopolitical unity with the US on the global stage tempered criticism. Despite lowering tariffs on Europe, Biden nonetheless passed the Inflation Reduction Act and CHIPS and Science Act, both criticized by the EU as protectionist .

Trump's second-term focus has again hit allies, yet the attention remains squarely on China, with individual tariffs on other countries being paused on April 9 , while tariffs on Beijing have increased.

Aside from direct exports, Washington also seeks to target China's role in global trade. Biden's push to“nearshore” manufacturing to countries like Mexico exposed the limits of decoupling, as Chinese companies quickly established themselves in new Mexican industrial parks.

Many imports shipped to the US from other countries also contain Chinese components, meaning Trump's 10 percent“baseline” tariff hike on all imports is meant to counteract other countries serving as conduits for Chinese goods.

In Project 2025, Peter Navarro emphasized the role of non-tariff barriers, like strict safety standards, customs delays and local content requirements, in obstructing US exports. The US uses these, too, and in early February 2025, Trump cited fentanyl smuggling as justification for raising tariffs on China, Mexico and Canada.

Even if a more conventional president follows, Trump's tariff hikes and resulting supply chain rerouting may prove difficult to undo. Critics question whether this transition can be fast, affordable or effective, but the Covid-19 pandemic proved supply chains can reorient under pressure relatively quickly , just as China showed its agility by setting up operations in Mexico during the 2020s.

A tariff war will nonetheless raise prices for consumers and businesses, ending the era of cheap global goods that the US economy has depended on for decades.

Countries maintained friendly ties to keep consumer market access and reinvested US dollars into American stocks, bonds and real estate. Uncertainty over Trump's policies saw a fake tweet about tariffs on April 7 trigger multi-trillion-dollar swings. Prolonged stock volatility or declines would reduce pensions, household wealth and corporate valuations.

Some argue that if the stock markets crash, money could flow into and lower the price of US treasuries , reducing their prices and allowing the government to refinance long-term bonds with cheaper debt.

However, many traditional US debt holders may demand concessions before continuing to finance it. Treasury yields have already risen , making new debt more expensive, and China, the second-largest holder of US debt, is suspected of shedding bonds to help do so.

China has also retaliated by raising its own tariffs and recently halting exports of some rare earths and critical minerals essential for modern technologies. Its state-backed firms can flood global markets with cheap goods and advanced tech, squeezing out competitors.

With a growing presence in international institutions and trade blocs, Beijing could increasingly shape global economic norms if these institutions and agreements become more fluid and the US steps back.

Trump also wants to devalue the dollar to make US exports more competitive, but insists on keeping the dollar as the world's reserve currency, which eases access to cheap debt. His approach is undermining global confidence in the dollar, even if no clear alternative has emerged yet.

Trump's pressure on a resistant Federal Reserve to cut interest rates further reflects limited borrowing options and coordination in US financial policy as he embarks on major economic upheaval.

Democrats have largely avoided serious condemnation of Trump's policies, recognizing it may be a losing political strategy. Still, some top members like Chuck Schumer and Gavin Newsom have marked early opposition, along with seven GOP senators who recently voted against Trump's Trade Review Act.

Trump's policies have some support from the US business class, which once saw China as a promising market but now sees it as a rival. No longer limited to cheap goods, Chinese companies like Temu, Shein , and BYD increasingly threaten giants like Amazon and Tesla.

Any success in bringing manufacturing back will mostly come through automation instead of high-paying jobs, benefiting major US corporations. Still, decades of cooperation with China means that these businesses remain exposed, with major corporate figures expressing public concern and Elon Musk publicly criticizing Peter Navarro's role in the tariff push.

Trump has, in turn, framed tariffs not only as leverage over trading partners but also as a source of revenue to offset other taxes. His 2024 campaign called for cutting the corporate tax rate to 15%, down from 21%, already lowered from 35% during his first term .

However, the promised economic boom was not evident before Covid-19 hit, and his suggestion of replacing personal income tax with tariff revenue is also unlikely to generate enough funds to do so, even in an optimistic scenario.

And while the US needs to expand production for both domestic use and exports, current capacity falls far short. Tariffs might push companies and consumers toward new habits, but blanket protection without government initiatives in infrastructure development, skills training and research and development risks doing more harm than good, and leaves the private sector to act with little guidance.

Compared to Trump's unpredictable approach, China and the EU have positioned themselves as stable anchors of the global economy. US calls to coordinate with major economic allies like the EU and Japan to limit dealings with China, including reducing Chinese imports and preventing its companies from establishing themselves, risk falling on deaf ears as tariffs have strained ties.

Reducing access to US consumers also threatens a major pillar of global economic stability. The US accounted for roughly 13% of global import consumption in 2023, acting as a safety valve for global overproduction by absorbing excess goods.

China, facing a property crisis , high youth unemployment and mounting local government debt, has pledged to“vigorously boost domestic consumption ,” according to the People's Daily, to help replace American consumers.

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But its $300 billion trade surplus with the US exemplifies its reliance and more limited leverage for retaliation. The EU has signaled it will not tolerate a flood of Chinese goods, as it, like the US, increasingly finds itself competing with China in high-end products.

The EU and Canada have similarly raised tariffs on the US. The Trump administration has tested EU unity by courting globalization-skeptic allies like Italy's Prime Minister Giorgia Meloni , though tensions are likely to deepen before they ease.

Europe's struggle to sustain support for Ukraine against Russia has shown the perils of deindustrialization, a trend the US now seeks to radically reverse ahead of others. And, by targeting allies with tariffs too, the US ensures that any self-inflicted economic pain is matched abroad, making the cost of reshaping trade a shared burden.

Forcing a global trade war-an escalating Canada-China tariff clash in 2025 is one sign-is likely to further weaken China's export-led model. As the US signals a reduced role in safeguarding global maritime trade, already strained by disruptions like Houthi attacks in the Red Sea and rising piracy, geopolitical tensions could disrupt other key routes. Without US intervention, free trade will face rising shipping and insurance costs.

Trump frequently changed tactics in his first term, mixing threats with negotiations. If his tariff strategy falters, voices like Kent Lassman's in Project 2025, calling for a return to free trade, may gain traction.

But Trump has been warning of trade imbalances since the 1980s, when Japan and West Germany were his main targets. He seems determined to make reversing it central to his legacy, this time focusing on China.

Scrapping the old, in his view, unreformable system and embracing whatever follows is based on the belief that the US is best positioned to shape the new system. The question now is which countries will support that shift or be forced to.

Whether a complete globalization teardown occurs or not, he appears ready to push as hard as possible within constraints. As evidenced by much of MAGA's merchandise still being made in China , dismantling Beijing's advantages in global trade will not be easy.

John P Ruehl is an Australian-American journalist living in Washington, DC and a world affairs correspondent for the Independent Media Institute .

He is a contributor to several foreign affairs publications, and his book, 'Budget Superpower: How Russia Challenges the West With an Economy Smaller Than Texas' was published in December 2022.

This article was produced by Economy for All , a project of the Independent Media Institute, and is republished with kind permission.

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